D2C competition: Winter is coming

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Netflix continues to grow fast and can appear invulnerable. It has just reported record subscriber growth. But, alongside, it is also making records in cash burning – $460 million versus $287 million in the same quarter a year ago. And this is before new competition arrives in the form of Disney+ and Apple TV+.

The new D2C plays bring a kind of pincer movement; the producers affiliated to the new entrants will no longer license to Netflix and, meanwhile, it needs ever more compelling content to ward off those same competitors.

The big pay-TV providers and the arriviste D2C players are about to enter a long, complicated and, ultimately, existential conflict. The frontlines will shift, alliances will shift, motivations will shift. But not all will survive. Loyal ‘bannermen’ will be called to the service of their brands but the fine balances of power will often be decided by the capricious choices of content talent and the (AI not withstanding) still unpredictable persuasions of the viewing populace. Sounds like a plot fit for a complicated continuing drama saga, or am I too late?

Success has bred success for Netflix, and as it has captured subscribers and territories it has mostly held onto them through the alchemy of just enough hits for just enough people for just a keen enough price. It is noticeable that Disney’s first big decision when bringing its big gun brand and endless content ammunition to bear was to set a surprisingly aggressive start price ($6.99). It has also taken command of Hulu just in time to style it the Disney channel for grown-ups. This deal also presages yet another D2C service from AT&T TW, the seller of the Hulu stake.

The exact winning blend for Netflix is a mystery and the company has gone to great lengths to keep it so – so, no ratings: no one outside knows for sure what is working and what isn’t. Obviously, a show doesn’t get cancelled for having too many viewers but, beyond that, few clues.  They are confident in their algorithms to monitor, analyse and predict viewer choices – though they are going to try out some good old-fashioned crowd teasing with ‘Top Ten shows others watched’ tables in the UK. Some interesting recent research showed that in the machine learning online world, where viewer numbers, demographics and attention spans are all allegedly accurately in the mix, it takes half the time it used to in the linear world to ‘wear out’ even a good drama series (two seasons before cancellation, against four).

New tactics and strategies will abound as the war drags on. Prime may be a loss-leader for Amazon but it doesn’t want to be an also-ran. It has been trying out sport, most notably tennis with its ATP Masters deal. Just looking at the way it has presented it – until recently it didn’t even bother to signpost which day was behind the tile, let alone which match, or if anything was actually on, like now, – I predict abject failure.  If it this is how sport is meant to be on SVoD, then any sport that signs an exclusive rights deal is penning a suicide note.

No matter how many dollars are spent (or put another way, no matter how patient the stockholders), and no matter how many content deals are done, the world doesn’t need half a dozen competing international SVoDs. And, even of it did, the world doesn’t hold enough of the ‘talent’ – writing, acting, producing, to make enough content worth seeing.


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